USD/CHF maintains its position around 0.8800 ahead of US CPI

• USD/CHF moves sideways near the psychological level ahead of US inflation.
• Fed is expected to maintain interest rates at 5.5% during the policy meeting on Wednesday.
• Market expects the Fed to keep monetary policy tightened for a longer period as the labor market showed resistance.
• SNB is predicted to maintain policy rates at 1.75% in its upcoming meeting on Thursday.

USD/CHF hovers around 0.8800 during the Asian trading hours on Monday, grappling to extend its profits for the third successive session. The USD/CHF pair has been on an upward trajectory, propelled by positive employment data from the United States (US). The rise in US bond yields, driven by speculations about the Federal Reserve’s (Fed) rates trajectory, is further strengthening the US Dollar (USD) and providing support to the USD/CHF pair.

The US Nonfarm Payrolls for November exceeded expectations with a substantial increase of 199,000, and the Unemployment Rate declined to 3.7% from the previous 3.9%. Additionally, the preliminary Michigan Consumer Sentiment Index for December showed a noteworthy rise, reaching 69.4, marking a significant increase from the previous reading of 61.3.

However, the consensus is that the Federal Reserve (Fed) will maintain interest rates at 5.5% during the upcoming monetary policy meeting on Wednesday. However, solid labor market conditions could put pressure on the Fed to maintain higher interest rates for a longer period. Investors are anticipated to closely scrutinize the US Consumer Price Index (CPI) data on Tuesday, anticipating potential market impacts.

On the Swiss front, the CHF experienced downward pressure following the release of seasonally adjusted Unemployment Rate data by the State Secretariat for Economic Affairs (SECO) last week. The report revealed that the total number of unemployed civilian laborers in November remained steady at 2.1%, consistent with previous figures.

Furthermore, the easing of the Swiss Consumer Price Index (YoY) for November at 1.4%, compared to the prior 1.7%, contributed to the depreciation of the Swiss Franc (CHF). The upcoming interest rate decision by the Swiss National Bank (SNB) on Thursday is expected to see the central bank maintaining policy rates at the unchanged level of 1.75%.